The court says the agency doesn't have the authority to regulate broadband; the FCC says it may appeal

A U.S. appeals court has struck down the U.S. Federal Communications Commission's Net neutrality rules.

The U.S. Court of Appeals for the District Columbia Circuit on Tuesday ruled that the FCC does not have the authority to implement the rules prohibiting broadband providers from selectively blocking or slowing Web traffic. The FCC passed the Net neutrality rules, also called open Internet rules, in December 2010, but Verizon Communications challenged them, saying Congress did not give the agency the authority to regulate broadband providers.

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While the Telecommunications Act of 1996 allows the FCC to "promulgate rules governing broadband providers' treatment of Internet traffic," the commission cannot contradict Congress, Judge David Tatel wrote in the decision. "Given that the commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the commission from nonetheless regulating them as such."

The Telecom Act separates basic telecom carriers from more advanced information service providers, making the second category exempt from many so-called common carrier regulations, Tatel wrote.

The court's decision means broadband and mobile providers are free to manage traffic as they see fit. But FCC Chairman Tom Wheeler promised that the agency would explore other options in an effort to protect consumers and free speech online.

"I am committed to maintaining our networks as engines for economic growth, test beds for innovative services and products, and channels for all forms of speech protected by the First Amendment," Wheeler said in a statement. "We will consider all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression, and operate in the interest of all Americans."

Net neutrality advocates criticized the ruling. "We're disappointed that the court came to this conclusion," Craig Aaron, president and CEO of digital rights group Free Press, said in a statement. "Its ruling means that Internet users will be pitted against the biggest phone and cable companies -- and in the absence of any oversight, these companies can now block and discriminate against their customers' communications at will."

The court's decision is disappointing, but it left the FCC some room to regulate broadband, said Harold Feld, senior vice president at Public Knowledge. The court's decision could push the FCC to reclassify broadband as a service subject to the common carrier rules for traditional voice service, observers said.

The agency could stop short of that, instead crafting "open Internet protections that are not full-fledged common carrier rules," Feld said by email. "Both of these are viable options," he added. "Public Knowledge has long held that both broadband is a telecommunications service, and that the modest protections offered by the open Internet rules fall well short of full common carrier regulations."

The court's decision, he said, means that "confusion over the proper role of the FCC is greater than ever."

Thomas Lenard, president of the free-market think tank the Technology Policy Institute, urged the FCC to avoid reclassifying broadband. Although the court decision "does cause the commission to have to reassess its effort to regulate Internet access providers, the most important thing is the FCC not view this as a reason to reclassify broadband," Lenard said by email. "Regulating broadband as a common carrier would be extremely damaging to the development of the Internet."

Grant Gross covers technology and telecom policy in the U.S. government for the IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.